Where Will All This Money Come From?

I suppose the title should be phrased, "From Whence Shall Come All This Money?" but I'm not in the mood to be elegant today.

We - you and I and everybody else - are getting ready to spend nearly a trillion dollars on a stimulus package, this on top of $700 billion in TARP money, plus somewhere between $1 trillion and $2 trillion in the "Son of TARP" bailout program announced yesterday by Tax Cheat, er, Treasury Sec. Tim Geithner; plus Social Security for Baby Boomers during the next 30-40 years ...

... get the point?

How much is a trillion dollars? If you spent a million bucks a day, every day, it would take you over 2,070 years to finish spending it. Stacked in neatly pressed, out of the ATM $1,000 bills, it would be 67 miles high, assuming the wind didn't blow and no one tried to sneak any out of it.

So where is this money coming from? Technically speaking, we are borrowing it.

How will we pay it back? There are four basic options, and I must give credit to Jim Manzi of National Review Online for laying these out in a great article about the Constanza-Hoover Principle.

1. Rollover the Debt. Just keep re-borrowing it from overseas creditors as long as they will put up with your deadbeat ways. Manzi says it's just like people who use one credit card to pay off another. In theory, it works, but you pay interest charges forever. At some point, however, the bill will come due.

2. Higher Taxes. Our children and children's children will undoubtedly pay higher taxes and get nothing from them other than the satisfaction of knowing that they are paying for the debts we racked up. Some estimate that tax rates for future generations will hit 70 to 80 percent of their income. Sounds like hell to me. It also seems very immoral for one generation to enslave the next handful.

3. Default on the Debt. An interesting idea. If we still have a potent military we can flip off the rest of the world when they try to collect, and then hope like hell we can grow all our food, make all our clothes, and provide for everything else that a modern nation requires because no one is going to take any more IOUs (which means no one is going to honor our money, since it is in essence a green IOU).

4. Devalue the Currency. Print lots and lots of money and use it to pay off your debts. Of course, the money will devalue, inflation will skyrocket as in Weimar/Zimbabwe style, and you essentially stiff your creditors anyway. You may still need a strong military, and everyone will need wheelbarrows or pickup trucks to haul the stacks of cash necessary to buy gasoline or bread.

There is another option which, sadly, we're probably unable to choose at this point: Shrink government spending, encourage private thrift and the pay-down of all debts, public and private, and learn to live within our means.

However, just because our government can't do it, doesn't mean that it still isn't a good idea for you and me. In fact, the Oklahomilist Household Budget priorities for 2009 involve an accelerated "get out of debt completely" plan. Don't talk to me of how un-American I am for not buying that big screen, high def TV that I kept hoping someone else would get me for my birthday.

Now if Mr. Obama and his spending pals in Congress don't crash the economy too quickly ...